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Europe’s Car Sales Rally On Hopes Of Virus Victory Stall On Chip Shortage

By News Creatives Authors , in Business , at August 10, 2021

The post-lockdown rebound in West European car sales has stalled and forecasts for the whole of 2021 are being slashed, as fears of renewed coronavirus closures plus the worsening semiconductor shortage faze and thwart buyers.

LMC Automotive cut its West European sales growth forecast for 2021 to 3.0% from its prediction last month of 9.6% growth. Sales dropped 24.5% in 2020 to 10.79 million and should reach 11.12 million this year, LMC Automotive said.

Meanwhile GlobalData, a data and analytics company, said its world car and SUV sales forecast for the year has been downgraded to 84.7 million, an 11.9% increase on 2020 but still almost 5% down on pre-virus 2019. GlobalData said the rebound had been a big boost for car manufacturers profits in the U.S., Europe and China as pent-up demand allowed for high margin sales.

But this boost will be short-lived as the sales rally runs out of steam and the chip shortage continues.  

“High-margin premium brands are doing particularly well and looking around the world, new car transaction prices are extremely high in the U.S. It’s a good time to be selling new cars and trucks there – if you can supply them to market. There are tougher times ahead though. The big swing to demand recovery from last year’s extremely low base has now largely completed its initial surge and we see a flat or slightly declining global automotive market in the second half of this year,” GlobalData automotive analyst David Leggett said. 

“Furthermore, semiconductor shortages are beginning to materially affect sales in the U.S., Japan and China which we expect to continue to choke sales into the start of Q4, Leggett said.

According to LMC Automotive, in July the West European annual selling rate dropped to 10.5 million from 11.9 million the previous month. Western Europe includes all the big markets like Germany, Britain, France, Italy and Spain.

In a report, LMC said the chip shortage is crippling supply chains and won’t go away any time soon. This is stopping auto makers from taking full advantage of the global economic recovery.   

“The impact of the global semiconductor shortage has led us to significantly reduce our sales forecast from last month as the crisis is clearly disrupting deliveries in many markets and will not dissipate in the immediate term,” the report said.

“We see selling rates gradually improving in the second half and well into 2022. For now, however, the impact of the chip shortage is thwarting the auto sector’s ability to reap the benefits of the improving wider economic backdrop. Moreover, risks lie on the downside as the more transmissible Delta variant of coronavirus spreads apace through Europe, meaning, despite vaccine progress, further restrictions cannot yet be fully ruled out,” it said.

UBS said second-hand car prices in Europe – up 8% year on year – continue to rally, but not as strongly as in the U.S.’s 34% jump, because the shortage of new cars here is not as great. Prices for gasoline and diesel cars and SUVs were leading the way, a rare moment in the sun before legislators ban the sale of new ones by the end of the decade.

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